- Change of container only: Remuxing - Demultiplexing + Multiplexing of the original media streams into a different container format, (eg. AVI->MKV, VOB->MKV). You may need to decrypt contents to access them but the original encoding/bitrate remains unchanged.
- Change of stream encoding: Transcoding - you are changing the encoding of the original stream format, (eg. MPEG2->MPG4-AVC). Doesn't necessarily mean a change of container, eg. MPEG4-ASP AVI -> MPEG4-AVC AVI.
- Change of bitrate: Transrating - you are reducing the bitrate of the streams while keeping both original container and encoding, this is what DVD Shrink, CloneDVD, etc do.
Thanks for that- I'd not heard the term remuxing before. Good stuff! So lossless transcoding still means that you are changing the encoding, is that correct? You're just not losing any quality over generations?
Yes - generally you do transcoding if the playback device can't understand a particular format encoding or another format offers better compression, (lossless or otherwise).
What MakeMKV is doing is remuxing, it might not be including some of the original streams from the DVD, (all the menu/warning rubbish), but neither is it changing the original encoded data.
Just for interests sake, I use MKVTools to remux into MKV containers, (for unenrypted formats), and AVIMux-GUI for remuxing to AVI, (it can do MKV also).
Also, it pays to make sure your MKV containers use uncompressed headers to ensure playback on the majority of devices, eg. the WDTV Live HD will not playback MKV files with compressed headers - remuxing to uncompressed headers takes less than a minute.
EDIT: Actually transrating may encompass change of container, (I'm not sure), the majority of its use is to make something big fit into something small, (eg. dual->single layer DVD/BD or bandwidth reduction) - the primary point is that there is just a reduction of bitrate while still in the original format encoding.